On Feburary 22nd, the Credit Union, also known by its official name “Baihang Credit”, has finally received its business license from the government which is also the first individual credit checking license.

Baihang's shareholders share one billion RMB in registered capital, with the biggest shareholder being the National Internet Finance Association of China (NIFA) (36%). The rest of the shares are distributed evenly (8%) among the companies which were all appointed by the PBOC as the trial credit checking companies four years ago: Sesame Credit, Tencent, Qianhai, Pengyuan, China Chengxin, Kaola, China Zhicheng, and Huadao.

The purpose of setting up Baihang Credit was to improve individual credit services. Current credit records from the PBOC cover one quarter of the total population of China. In addition, the data is all from financial institutions who may not provide complete records. On top of the limited coverage, it also lacks information depth. As a result, some consumers could borrow large amounts of money from different platforms without disclosing their existing debt, thereby creating greater risks of loan fraud for the online lending industry. Baihang Credit is expected to solve this issue by combining data from all the different online data bases. The data is also different from data provided by banks, thereby improving the accuracy and competency of the data base significantly.

Baihang Credit will mainly provide services to internet loan companies, aside from banks, other traditional financial institutions and regulators. However, it will create issues regarding data sharing. First of all, Baihang Credit does not have access to the PBOC database, although banks can acquire data from the eight credit companies. This will create unequal benefits between members of Baihang and the banks, giving way to a potential rise in conflicts in certain areas such as customer acquisition. Additionally, there is still no clear solution for data isolation, since there are no clear rewards for companies sharing data, it is unlikely that data owners will voluntarily offer to share their prized databases.

If these issues cannot be solved efficiently, Baihang Credit will not last for long as a combined platform for credit checking companies and the first individual license may end up being nothing more than a botched experiment. As clarified on the license, the qualifying period is the three years running up to Feburary 2021. If there is no clear progress by then, the central bank is unlikely to extend the license. As a result, the future of the credit checking industry in China is arguably still as bleak as it was before, thereby also affecting other industries, including inclusive finance.